Jumbo life insurance policies typically begin with face amounts of $5,000,000. Insurance companies and some life insurance professionals cater to this market which is highly specialized.
Jumbo life insurance buyers work with insurance professionals to secure coverage with the lowest rates and the best underwriting class. There are considerable differences when underwriting policies for $1,000,000 and ones for $15,000,000, $50,000,000 or $100,000,000. A key factor in determining the policy’s premium is the final underwriting class that is offered. The difference in underwriting classes can be dramatic. Double digit differentials are typical because the cost of insurance is higher as the classes reflect. Don’t be fooled by “loss leader” rates that initially look good during the quoting process. The quoting process is not where the battle is won and lost. Preferred best rates are only offered to people who take no medication, have no medical history and whose families have no medical histories. Underwriting term insurance is very different than underwriting permanent insurance such as whole life, indexed universal life and guaranteed universal life. Most high net worth consumers prefer permanent life insurance because they understand that the net cost of permanent life insurance is much lower than term insurance.
The ultimate underwriting class of a jumbo policy is important when considering:
- jumbo term insurance
- jumbo indexed universal life insurance
- jumbo whole life policy or
- permanent life insurance.
In fact, getting the best underwriting class should initially be the agent’s top priority. To get it, your agent must be experienced and willing to create a file package that provides underwriters with your best case possible. Doing this properly requires experience and expertise from a pro who is willing to push back and do research about illnesses and medications. The right agent will have extensive relationships with underwriters and who can represent all companies. Working with insurance agents who represent only one insurance company, known as a captive agent, is working against jumbo life insurance buyers.
There are only a small group of insurance companies specializing in the large case life insurance market. Insurance companies may share underwriting results with one another, which is authorized through the application process. One way is through the MIB (the medical information bureau). The chance of future problems increases if the underwriting process is not being managed properly. The best outcomes occur when insurance professionals represent the best interests of their client by approaching the process with complete transparency and disclosure.
What you need to know for obtaining the best rates:
Check your underwriting history. I work with my clients to get an accurate picture of their health history and their life insurance history, including previous submissions. With this information, we create a report of how much coverage is currently inforce and how much will be replaced, if any. The total amount of inforce coverage at the end of underwriting is critical information to share with underwriters, at the beginning of the process.
Chronicle the medical history. This helps us understand both current and past health issues which may impact underwriting decisions. We recently helped a 66 year old woman acquire a jumbo policy for succession planning purposes. She had been on lithium for 15+ years without any problems. Suddenly, she had developed a tolerance to the lithium that created some temporary issues. All her current coverage was issued on a preferred basis. Knowing the history helped the right underwriters understand it was a medication problem and nothing else. Many underwriters declined the case.
Product Design. The underwriting criteria is different for permanent coverage than it is for term insurance and selecting the right product can be complicated. Commissions, high cash value riders and term blends should all be considered as each of these variables can impact price and net costs.
Premium financing and jumbo life insurance: In many cases, it is a perfect combination. Premium financing is often an ideal strategy for purchasing permanent life insurance. Like now, loan rates are significantly lower than a policy’s rate of return and a policyholder’s ROI. An in depth analysis must be done by the life insurance professional to outline the pros and cons of Premium Financing:
Cover letters go a long way in helping underwriters understand what a prospective client is trying to accomplish with life insurance. Often, these jumbo life policies involve complex estate planning strategies. A cover letter is always beneficial.
Please contact me at 561-869-4500 or email me. I offer a complimentary consultation to discuss anything you wish about life insurance or annuities. I am proud of the things many clients have chosen to say about us and perhaps they will give you additional insight about how we do business.
You can visit us at www.facebook.com/lifecycleplanners
Also published on Medium.